Don’t Stop with One, Throw Them All Out!

It is reported that U.S. Senate Banking Committee Chairman Chris Dodd has called on the head of G.M. to resign in exchange for G.M. receiving bailout money from the federal government, while it is also reported that a new “Auto Czar” is to be appointed along with any bailout funds. This illustrates the problems with government intervention in the private sector. The intervention is done unevenly, with government officials suddenly thinking they know more than shareholders and boards and a few “public targets” taking the heat for the many, all for the sake of a political show.

How is it that we can give hundreds of billions to the banking industry and never ask for a resignation, restructuring or even a plan as to how these executives plan to get out of the mess they created; but for a relatively small $15 billion, the senate demands that the automaker submit restructuring plans and Senator Dodd insists on a chief executive’s resignation? I am not against these leaders paying the price for poor decision making but why is it so unevenly distributed? Could it be because Wall Street banking firms have become revolving doors for politicians and their cronies? Both the outgoing Bush administration and incoming Obama team is filled with Wall Street bankers who have made and continue to make tens if not hundreds of millions from banking and financial arbitrage firms. Few revolve into and out of the automakers.

Also, if we are asking those responsible for the current financial mess to resign, should we not begin with those of the Senate Banking Committee? They were responsible for the oversight of the financial system and they stood on the side lines while the industry not only self destructed but allowed its greed to nearly destroy the entire economy. Chairman Dodd, Barney Franks and a host of others should resign their positions on the Senate Banking Committee if not their seats in the Senate. Where is their accountability? How about the regulators in the FDIC, Federal Trade Commission and others? There has been no accountability for their actions and lack of actions. They are guilty on all counts.

These agencies failed to place controls on new financial instruments such as derivatives that drove the market into its collapse. What is worse is that they failed to take some basic steps such as increasing the equity requirements on margin trader accounts and encouraged banks to look past the eligibility requirements of lenders. During the Clinton administration Congress decided to eliminate the “Up Tick” rule which had held many arbitrage firms in check. Since its elimination so called “Bear Raids” where a firm bets that a company’s stock will fall in price and then causes it to do so by causing it problems with insurance and market firms; have run rampant causing a few to make hundreds of millions if not billions while firms suffer and stockholders lose their investment. This is not the fair and open trading field government is supposed to provide.

The fact is that our government has been corrupted and no longer looks for the just or fair answer. It is always seeking a political solution that enables the favored parties to prosper, often at the cost of the general economy and country as a whole. It is clear that both parties have lost all sense of financial responsibility as they cooperate to spend over a trillion dollars beyond a budget that was already in deficit. Some day the future taxpayers of this country will curse us all … hardly the legacy we should desire to leave them. The solution will only come at the voting box, when we have the courage to kick them all out and start over again. It is the only just option left and the only one that will give hope to future generations.

Steven Foppiano